I just retired and at the moment I've got enough money coming in to cover my expenses. When should I convert my deferred annuity to an immediate annuity? When I need the money? Or should I start the payments before that?
Hi Walter, as a general rule, the longer you can wait to convert ("annuitize") your deferred annuity to an immediate annuity, the higher your payout will be. So if you already have enough income now to meet your expenses, waiting may make sense simply because you don't need the extra income. You might also consider the tax benefit of waiting, since you will not owe any income tax on your annuity until you start withdrawals.
The other factor to think about is your beneficiary option. If the annuity will be paid out over your life alone, for instance, then consider your health and longevity in your family. If you're in good health and have long-lived family members, waiting to convert makes sense. If your health is not so good and/or your family members tend to live shorter lives, then converting now could make sense. If you have the option to stretch your annuity payments over two lives (you and a spouse, for instance), then you can delay if you wish, knowing that even if you should pre-decease your other beneficiary, she will still receive annuity benefit payments.
Those are just a few factors to consider.
Mike
You may not be required to convert the annuity to monthly payments at all! It may be possible to roll the money out - in a lump sum - into a regular brokerage account. This way, you can take income if/ when it is needed and still retail a lump sum for emergencies or to be left for your heirs... which is not the case when you take annuity payments. Feel free to call 516.240.6161 or e-mail evan@completeadvisors if you would like further clarification. Good luck.
